00:01This is the IMF's regular forecast publication, and in many ways I think the interesting thing
00:07coming out from it was the fact that they published different scenarios.
00:11That reflects the uncertainty that we're experiencing in the world at the moment, and that key uncertainty
00:17of at what point does the Strait of Hamus reopen fully, and how quickly does energy
00:23supply recover, they have some quite extreme scenarios in terms of prices staying high
00:31for a really long time.
00:32The numbers that we're looking at in our own forecasts are more an eight-week closure of
00:38the Strait of Hamus, and then a slow reopening from there.
00:42And so I think thinking through how those different scenarios might play out is exactly what the
00:48IMF can help governments with, thinking those scenarios through at this stage.
00:53And so this is now a higher inflation, lower growth scenario, and that's true for their
00:59Australian forecasts.
01:01Some particular issues for Australia are that while it's a negative income shock for most
01:07consumers, as they're contending with higher prices, for the economy as a whole, we do get
01:12that extra tax revenue from energy exports, and we can do those gas for oil deals that the
01:19government's already doing.
01:20So it's a somewhat more nuanced picture for Australia, but for the consumer, it is a very
01:25big hit.
01:26But the reason the IMF is concerned is because in the end, if you've had a reduction in supply,
01:33you need to meet that with lower demand.
01:35And economics will tell you that the way that you induce lower demand is by having that high
01:41price and inducing people to economise on it.
01:44We see this in our own banking data here at Westpac, where we see more people are using
01:52public transport.
01:53People initially topped up their petrol tanks more frequently and then pulled back on that.
01:59So people are making decisions day to day that reduce their own demand for fuel, and that's
02:06what higher prices do.
02:07It gives me no pleasure to forecast three more rate hikes.
02:11Australia already started this period with inflation above the Reserve Bank's target.
02:17The Reserve Bank's been very clear that it sees getting inflation back into its 2% to 3% target
02:24range and back to that 2.5% midpoint as job number one.
02:28And the communication that they have been putting out over the last weeks and months has been
02:35they see that the Australian economy actually does need to slow and that consumption and
02:40business investment do need to moderate in order to make room for what is a constrained supply.
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